Asia

Rice is cooking

IT SEEMS like an age ago, but it was only early last year that alarm was rife about soaring food prices. Tight supplies and rising demand led Asian governments to hoard grain and issue emergency export restrictions in a fashion that turbo-charged an already steep climb in prices. The lesson is that, as well as all sorts of nature-related risks, the markets for food staples also carry a big political risk. It takes jittery consumers and their governments merely to perceive looming problems of supply for their actions to bring about just what they fear. Luckily, in this sense only, the global financial panic stilled the speculative fever and brought supply and demand better into line. A repeat of such a spike has seemed unlikely any time soon.

But to puncture any complacency comes a report on the rice market by an HSBC economist, Frederic Neumann, who sees shades of early 2008. He notes that global rice prices have risen by a quarter from their recent lows. Several factors explain the sudden jump. In the Philippines typhoons have devastated crops. The country will need to buy a tenth of all internationally shipped rice in the coming year. Drought in India has sent production down by nearly a fifth. Next year El Nino is expected to disrupt rice production across Asia.

Not only rice prices are rising. Other commodities from sugar and tea to Chinese garlic are on the move. Mr Neumann warns that rising food prices risk feeding soon into headline inflation. After all, in many Asian countries rice alone accounts for almost as great a weighting as energy in the basket for calculating the consumer price index. Indeed, in India, Sri Lanka and Vietnam the rice weighting is greater. And energy is anyway on the rise as well.

Dearer rice raises questions about the path Asia's recovery, the chief bright spot in the global economic picture. Of course, rising food prices generally mean a redistribution from urban areas to countryside. Rural households will often have a greater propensity to consume more of a given income boost than will their urban counterparts. Yet for whatever cause (monetary tightening to offset inflationary effects, perhaps, or higher energy costs), that didn't happen in 2008: aggregrate consumption slowed across the board. Reason, says Mr Neumann, to keep watching the rice cooker.